Fed Chair Jerome Powell says the Fed needs greater confidence that inflation is moving sustainably toward 2 percent before it cuts rates. A March cut is not the base case.
Fed Pauses, Offers Guidance On Rate Cuts
As expected, the Fed paused in January. The Fed’s Press Release said little.
Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.
In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
The last sentence summarizes the Fed’s stance. It was the subject of numerous questions at the press conference.
Press Conference
Press Conference Highlights
Fed Chair Jerome Powell says “We need some confirmation”, that inflation is coming down before it cuts rates.
Powell says the Fed does not know the “neutral rate.” That’s defined as the interest rate that is neither loose nor restrictive. The timing of cuts will depend of data.
“Core inflation is still well above target on a 12-month basis. We are not declaring victory at all at this point,” said Powell. The Fed does not think inflation will head back up, while admitting it’s possible.
“It’s a good labor market.” Unemployment has been below 4.0 percent for the “longest period in 50 years.”
“The Committee Intends to move carefully,” and the Fed is data dependent. “It depends on the economy. The Fed will react to the data.”
In one of his more accurate assessments “consumers are right to be unhappy [about inflation],” said Powell.
March Cut Not the Base Case
Starting at about the 1:30:40 mark in the above video link …
In the key moment at the press conference, Powell stated “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March is the time to do that.”
A March cut is “probably not the most likely or what we could call the base case.”
ADP Reports an Increase of 107,000 Private Payrolls
The hiring slowdown of 2023 spilled into January, and pressure on wages continues to ease. The pay premium for job-switchers shrank to a new low last month.
On the jobs front, ADP Reports an Increase of 107,000 Private Payrolls, BLS Reports Friday
ADP reports the premium for job switching is dropping rapidly. That show up in the huge slide in quits.
In advance, I commented Job Openings Rise in December But Quits Tell the Real Story
Meanwhile, the Fed wants more data.
The FED is not going to cut rates anythime soon unless they are forced too . . .
I was watching my local news tonight and they had a news report about a new bi-partisan bill being pushed through congress called the Elder Care Tax Credit.
It’s for caregivers and the credit would average $1500 and it could be up to $5K. It said it would kick in above $2000 spent with the credit set at 30% on any spending above that level, if I heard it correctly.
What’s the cost? I am not sure, but the uni-party spendaholics are hard at it trying to pile on even more debt.
Suddenly Biden polling is way up bc of women. The same trend that happen in 2020 and 2022 continues. Women are going to show up in droves and come hell or high water, become single issue voters.
Only agree if the single issue is the economy, not abortion.
Our savings are back up, spending is basically the same and income is the same. What gives ? I did a personal forecast last summer that we would be treading water for awhile. Prices of everything around us have declined. Food, gas and everything else is down. There is really no way savings to go up unless there is more income (there isnt), less spending (nope. Went to Vegas for the holidays and Caribbean last summer). Prices have gone down.
Prices up 200%
Prices fall 30%
Declare victory and celebrate
UTTER INSANITY
@Casual Observer….Dude, where are you living? Gas price the highest it has been in the last month or two in my city. Energy costs drive every other cost. Housing prices continue to climb in my neighborhood…homes are on the market for less than a month before there is an offer, usually culminating in a bidding war.
You are cracker boxes, which, if you were, would be up 75%–both the crackers AND the box they are in. Stupid little things like buns or bread at Walmart have increased twice in the last 3 months, most recently as last week. I mean c’mon dude, when those prices are now 60% and 99% higher than 3 years ago and continuing to rise, like most items i see including the big ones like housing, stock prices, homeowners insurance, health insurance, medical costs, tuition, and now even gas again, there’s absolutely no way prices are going down. Some areas may not be rising as fast but they are certainly not going down in aggregate. Not even the Fed’s crooked-as-f numbers are showing them going down. If the crooks who have underreported inflation my entire adult life can’t show demonstrable deflation, it surely isn’t happening.
Prices are higher, but I would not know one thing about this shit if I just cut the checks and lived my life not knowing about it. EVERYTHING is as it is reported by authorities. Screw them.
He might not know, but the UST 10-year yield knows – it’s 3.9% …a goot 150bp to go.
Vanguard’s model is going for June for rate cuts, March onwards is the drumbeat.
Oh, and by the way, price rises are not inflation. Synthetic inflation masks deflation.
Bond market has been DEAD WRONG for at least 2 years as well. There are no bond vigilantes remaining. Just bullshit algos
This Fed is neutral in an election year. JP isn’t supporting Biden by cutting rates, or
Trump by hiking. Wall street didn’t like it.
Those levered longs or 100% longs have been begging for pause pivot pause pivot pause pivot and now cuts cuts cuts for the last 2+ years. They LOVE the massive price bubbles and are gambling it continues. At the same time, they don’t GIVE A SHIT about the millions in food and housing insecurity due to 4 years of 40 year high inflation. It’s sickening actually. The “I gotta get mine” selfishness is off the charts. And the FED just keeps giving the gamblers exactly what they want which is criminal.
I hope for a crash and depression daily as society has devolved in to a cesspool of the haves and have nots and the inequality is disgusting.
I know it will be resolved one way or another. I prefer my way. The alternative is at the sharp end of a “pitchfork” and pure chaos. The haves should be in my camp and very nervous of what may come next……
I agree with a lot of this sentiment. However, your hero Trump is the biggest fan of low- or zero-percent interest rates.
One of the things I most liked about candidate Trump, besides (broken) promises on immigration reform, was that he said we’re in a huge asset bubble as a result of artificially low interest rates. But of course, it was a different story as President Trump. I guess the vanity of presiding over a high-flying stock market got the best of him.
When Powell started very necessarily hiking rates in late-2018 and early-2019, he was browbeat mercilessly by Trump for months via mean tweets until the Fed started cutting.
https://www.cnbc.com/2019/10/31/trump-rails-against-powell-day-after-fed-cuts-rates-for-a-third-time-this-year.html#
Powell is a pussy and should have told Trump to “shove it” by just ignoring him.
Trump can’t help himself. I GET IT. He should have been ignored on the FED’S business. And Congress needs to HOLD EVERY PRESIDENT from overspending. I want a balanced budget tied to Congressional officials AND STAFFs paychecks. That type of bill would fix a lot. That will KILL debt ceiling raises and insane spending to start.
It’s one thing to say it as a candidate. It is completely different when you are the President and have to GOVERN.
Looks like a lot of the haves here are mad at being called out and dont like my comment. Ffs if you have kids or grands, you know the massive struggle they are going through. You want your legacy to be about screwing them even harder? Not me. I’m sick of the shit “we” are doing to them and the FED and Congress are in the same guilty boat. This is pathetic.
The FEDs balance sheet should be at ZeRO by now and they should have taken the FFR to 7% in 2022 and 2023…. b bu but BUT the haves begged and pleaded for the FED to keep the fraud going and take it easy.
Massive struggle???LOL, puleeze your kids and “grands” likely have never had it big better, they are likely driving a $50,000 SUV and have the latest iPhone, MacBook pro and several Canada goose coats because YOLO. How much in thousands do you like other parents and grands give your 20 and 30 sometimes for spending money for the items I mentioned each month
Exactly why the economy can sustain itself for a lot longer than people think. The next generation is set to inherit a lot of money once the parents and grandparents kick the bucket. I saw one report saying it will be 20 years before these trillion dollar deficits matter.
It will be a lot sooner than 20 years as these young kids spend the money as fast as they receive it. They don’t know how to work hard and save for everything you get.
Kids don’t really save anymore.
They schedule their cash-flow.
Thanks Hank
and the game of musical chairs continues……..
It’s interesting to see how keenly “everyone” still expected a cut or at minimum more dovishness from the Fed today. Seemed certain to me they’d stand pat and push expectations for a cut out at least 1-2 months, and he’s definitely pushed it out at least six weeks with the “I don’t expect the data to support a March rate cut” comment that tanked the markets pronto.
Do we get rotation from tech into materials, energy, etc? That’s how I positioned for this, along with the cannabis ride.
The corner Powell is backed into is that the bond market clearly says cuts are here, but the stock market will obviously bubble up and over the moment he does.
Layoffs, selloffs, and crashes seem unavoidable at this point – it’s all baked in.
Future bankruptcies will be The Mother of all Debt Jubilees. Economic interference from poorly invested money and capital will get cleared off the table.
The tap dancing has become exemplary.
But a bit tiring.
A little soft shoe would be nice for a change.
Perhaps that sand-on-the-floor foot shuffle thingy.
Powell has often cited the “unsustainable” trajectory that fiscal policy is on.
Normalized interest rates are just about the only thing that at this point has the potential to end (or at least put a dent in) the reckless deficit spending.
The Federal government is running $2+ TRILLION annual deficits with the unemployment rate below 3%. That is your 3%-5% annual inflation right there. Enabling more of that deficit spending with lower rates will only lead to higher inflation pretty soon and Powell knows this. He also understands that as a Federal government employee (Executive Schedule, Level I) he might lose his job if his boss the President is unhappy with him.
He can’t “normalize” them… he’s not in control… the bond market has spoken, they’re going down… the problem we have is Japanification, and the excessive global debt (China as well as USA + China’s development model and demographic implosion).
Powell is already rich, he doesn’t need the job. I think he like intellectual challenge of it, and he probably enjoys being the most important person on the planet.
Think he’s not? How many people hang on his every word?